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Contribution Details
| Type | Working Paper |
| Scope | Discipline-based scholarship |
| Title | Do Institutional Investors Stabilize Equity Markets in Crisis Periods? Evidence from COVID-19 |
| Organization Unit | |
| Authors |
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| Language |
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| Institution | University of Zurich |
| Series Name | Swiss Finance Institute Research Paper |
| Number | 20-56 |
| Number of Pages | 68 |
| Date | 2022 |
| Abstract Text | During the COVID-19 crash, U.S. stocks with higher institutional ownership performed worse. This under-performance is unrelated to revisions in earnings expectations, which suggests a disconnect between stock prices and firm fundamentals. Two mechanisms were at play: Institutions faced a sudden increase in redemptions and simultaneously attempted to de-risk their portfolios. Most types of institutional investors re-balanced portfolios toward financially strong firms, whereas hedge funds sold indiscriminately. Data from a discount brokerage (Robinhood) confirm that retail investors provided liquidity. Overall, the results suggest that when a tail risk realizes, institutional investors amplify price crashes. |
| Free access at | DOI |
| Digital Object Identifier | 10.2139/ssrn.3655271 |
| Other Identification Number | merlin-id:19597 |
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